Canadian Dollar gains as US inflation data fails to boost the US Dollar, BoC decision eyed
The Canadian Dollar (CAD) strengthens against the US Dollar (USD) on Wednesday as traders digest the latest US Consumer Price Index (CPI) data and await the Bank of Canada's (BoC) interest rate decision. At the time of writing, USD/CAD is trading around 1.3925 after touching a six-month high of 1.3969 on Tuesday.
US inflation rose for a third straight month in May, with headline CPI increasing to 4.2% YoY and core CPI ticking up to 2.9%. Both readings came in broadly in line with market expectations. However, monthly core CPI eased to 0.2% from 0.4%.
The data failed to provide fresh support for the Greenback, although it remains underpinned by escalating tensions in the Middle East. US President Donald Trump said in a Truth Social post that Iran had "taken too long to negotiate a deal that would have been great for them" and warned that Tehran would now "have to pay the price." The remarks came after Washington and Tehran exchanged military strikes on Tuesday.
Meanwhile, traders may avoid taking aggressive directional positions ahead of the BoC's interest rate decision due at 13:45 GMT. The BoC is widely expected to keep its policy rate unchanged at 2.25% for a fifth consecutive meeting.
With the decision largely priced in, the focus will be on the central bank's forward guidance. Any signal that policymakers are considering raising interest rates in the coming months could help the Loonie recover some of its recent losses.
Technical Analysis:
On the daily chart, USD/CAD maintains a constructive bullish bias as spot holds well above key moving averages. The Relative Strength Index (RSI) hovers just below the overbought threshold near 69, while the Average Directional Index (RSI) above 30 hints that the bullish trend is gaining strength rather than merely oscillating.
On the downside, immediate support is seen at the 200-day SMA around 1.3816, with the 50-day SMA at 1.3765 and the 100-day SMA at 1.3724 reinforcing a deeper demand zone on pullbacks. As long as USD/CAD holds above these clustered daily moving averages, dips are likely to attract buyers, and the broader risk remains skewed toward further gains despite the increasingly stretched momentum backdrop.
(The technical analysis of this story was written with the help of an AI tool.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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